September 28, 2010 by akhilendra

ETF offering a good bet

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Market has been crossing new highs, sensex is soaring and money is coming in like it is never going to stop.  FII have pumped in more than 18 billion USDs in Indian market. Market has gone up in a very short span of time. Share prices of good companies have zoomed in very fast. Retail investor remained on sidelines and waiting for correction to happen so that it can enter the market at correct prices. But rally doesn’t seem to stop soon.  Traders are still busy buying and selling stocks but average retail  investors feels like being left out of a great rally, which he could have used to make great money. So investors are opting for mutual funds, but there are so many fund houses and schemes available in market that choosing the correct scheme from correct fund house in itself becomes a challenge.

Mutual funds are best bet for a average investor who wants to create wealth out of stock market in long term. They are safer as investor doesn’t bear the tension of selecting the right stock at right price. Fund manager does that, but again how many of average investor are aware about fund manager past assignments? There is one more disadvantage with mutual funds and that is, it cannot be traded like a stock. So, those who are having long term vision and at the same time looking for an option which can be traded like stock but offer good returns and safety like mutual funds, then ETF is the option for you.

ETF stands for Exchange Traded Funds; they have been around for a while and are quite popular among investors. They generate good returns and resemble mutual funds in terms of unit allocation and its valuation. ETF holds assets such as stocks, commodities, or bonds and trades at approximately the same price as the net asset value of its underlying assets over the course of the trading day. They can be traded like any regular share scrip.  These are few ETFs which are traded on BSE and NSE.

ETFs are like any mutual funds in terms of holding pattern and then deriving the NAV from the value of their holdings. Now even gold ETFs are available in market. They are very good form of investment as it doesn’t require investor to store and maintain physical gold and its unit can be easily bought and sold through trading platforms. Here are Few GOLD ETFs available in market;

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